Earlier this month, Public Citizen released a report that praised the work of private consumer lawsuits to make parallel state enforcement efforts possible. The report cites the tobacco litigation and various insurance abuse cases, and calls for strictly limiting arbitration by, among other things, banning forced arbitration clauses in consumer and employment cases, the subject of the Arbitration Fairness Act. Not surprisingly, this report distorts the truth, which is that trial lawyers, not consumers, would benefit from such a radical campaign against arbitration.

But Public Citizen was not objecting to arbitration in general, rather to forced arbitration and class action bans. From the report, which examined how arbitration law too often disfavors state consumer protections, a posture that has allowed businesses to begin a "widespread practice of inserting forced arbitration clauses into consumer contracts":

These clauses require that any potential disputes must be settled through private arbitration. Consumers are harmed by these clauses because they are denied the opportunity to have their case heard in a neutral court of law that is subject to public oversight. In forced arbitration, the company selects the arbitration firm that will conduct the hearing, giving the arbitration firm a financial incentive to favor the business. Moreover, arbitration proceedings are often conducted in secret, may be adjudicated in a manner that does not follow the law, and frequently limit many common legal principles, including the use of discovery. Also, there is scant opportunity to appeal an arbitrator's ruling.

The Supreme Court's 2011 ruling in AT&T Mobility LLC v. Concepcion compounded the effects of [previous anti-consumer rulings] by permitting companies to insert language banning the use of class actions into arbitration clauses. Class action bans often have the practical effect of preventing consumers from seeking redress of any sort, whether in arbitration or in court, because the alleged harms to individual consumers often are not large enough to make it economically feasible to bring a case.

This is not a "radical" position and arbitration voluntarily entered into is not the issue. In addition to consumer advocates and the liberal Supreme Court justices who disagree with the anti-class action decisions NRO defends, even arbitrators have joined groups like Public Citizen in criticizing forced arbitration clauses combined with bans on class actions.

For example, in the recent American Express decision, in which a conservative majority upheld one-sided contracts that force weaker parties to concede their ability to vindicate rights in the event of corporate wrongdoing, professional arbitrators specifically warned against this circumvention of the justice system. From their amicus brief in American Express v. Italian Colors:

Holding that arbitration clauses must be enforced even if the claims at issue cannot effectively be arbitrated will reduce public confidence in the arbitration system. The legitimacy of arbitration, a system that depends on consensual contractual agreement, depends on public support and trust. A ruling for [American Express] would set back arbitration[.]

First, it would continue to drive down public support for arbitration. Evidence shows that while members of the public believed in arbitration as a general matter, their support for arbitration drops dramatically when they learn about the specific procedures, such as the one at issue here, that arbitration clauses often impose.

[...]

Third, even though many arbitration clauses do not preclude effective vindication of statutory rights, sanctioning [American Express'] arbitration clause would taint legitimate participants in the arbitration system by association. This would set back years of work by arbitration provider sand advocates to improve the image of arbitration in the eyes of the public.

Conservative legal and economics experts also disagree with NRO's assertion that class actions, particularly those involving small claims, "don't usually help consumers." Conservative judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit - no friend of trial lawyers who abuse class actions - has recently become quite vocal in defending the equity of class actions, pointing out that even where the damages are "meager," a "class action, like litigation in general, has a deterrent as well as a compensatory objective."

More importantly, Posner has repeatedly pushed back at the idea that there is a "realistic alternative" in the face of the forced arbitration and class action bans that right-wing media tout. From an oft-quoted 2004 opinion:

[T]he more claimants there are, the more likely a class action is to yield substantial economies in litigation. It would hardly be an improvement to have in lieu of this single class 17 million suits each seeking damages of $15 to $30.... The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.

In their pretense that these individual suits are counter-intuitively "cost-effective" and desirable alternatives to class actions, it appears NRO's reasoning matches that of a "lunatic or a fanatic." Ultimately, this may be a bit more "shocking" than the fact that lawyers get paid not only to defend corporations, but also multiple plaintiffs that have been hurt by unconscionable contracts.

FOLLOW US ›››

SergioMunoz
›››

Sergio Munoz is the Director of Courts Matter. Prior to joining Media Matters, he worked on progressive law and policy for the American Civil Liberties Union, the Federal Rights Project, and NCLR. He is a graduate of Brown University and the University of Michigan Law School.